It’s all about the money

In the recently-concluded G20 Meet in Brisbane, Australia, US President Barrack Obama and Japanese PM Shinzo Abe committed to $4.5 billion towards a Green Climate Fund, a U.N. fund to help poor nations cope with global warming that aims to collect $10 billion by early-2015.

This reminded me of the Scandinavian pop artist Meja’s hit solo album titled ‘Seven Sisters’ of 1998 where she sang:

“…We find strange ways of showing them how much we really care

When in fact we don't seem to care at all

This pretty world is getting out of hand

So tell me how we failed to understand

It’s all about the money…I don’t think its funny…”

In continuation to our conversation on the post-2015 development agenda, let us look at the financing for the new development agenda and why it is important for us. To begin with, the new Sustainable Development Goals (SDGs) that will come into effect post-2015 are going to be defined by their emphasis on sustainable development. The Green Climate Fund (GCF) is one such mechanism. While the G20 Communiqué from Brisbane[1] supports mobilizing funds for the GCF, with just two countries – the U.S.A and Japan – committing to resourcing this Fund, it still seems an uphill task.

Globally, the amounts needed for climate change mitigation (this means preventive measures such as - checking global temperature rise, protecting forests and oceans that are also known as carbon ‘sinks’) ranges from $ 400 to 1,200 billion a year by 2030. For climate change adaptation (this means efforts to adjust to future climate change such as - a farmer planting more drought-resistant crops or a city ensuring that new coastal infrastructure can accommodate future sea level rise), the bill works out to anywhere between $ 50 to 170 billion per year by 2030. The proposed GCF with a pool of $100 billion aims to address this deficit to some extent.

On what it would cost for some of the other critical areas, a UN Committee constituting of 30 experts from across all regions globally worked out estimates and submitted its report in August 2014 to the UN General Assembly. The following table presents these calculations:

Focus Areas

In Billion USD

1. Global safety net to eradicate extreme poverty in all countries (measured as increasing incomes of the poorest to the $1.25 a day standard)

Source: Report of the Intergovernmental Committee of Experts on Sustainable Development Financing, August 2014

Source for point 5: Paying for Zero: Global Development Finance and the Post-2015 Agenda accessible here..

Point 1 in the table talks about funding a global safety net to end poverty globally which is measured in terms of increasing incomes of the poorest to a $1.25 a day benchmark. Activists have been voicing their concern about this paltry amount which translates to a meager Rs.75 a day.

What can this buy for an Indian family of four living in the capital city of Delhi? A litre of skimmed milk = Rs.34[2]; a kilogram of onions = Rs. 25-30; a kilogram of wheat flour = Rs. 16. And we are not even looking at electricity or transport, leave alone shelter, water and sanitation that are basic entitlements for a life with dignity. Now we can see why the mythical poverty line has more aptly also been called the starvation line.
Examine one more fact: Official development assistance (ODA) stood at $134.8 billion in 2013, the highest level ever recorded[3]. Comparing this to the massive bill of $5222 billion that we have accumulated to ensure some basic services, we can see that the amount from ODA covers just 2.5% of the bill. We will then need to look at other options as well. The UN Committee Report also flags some of the other sources that are available to us to tap into. These include: increased taxes collected by governments, private sector contributions, international trade and financial markets. Checking the outflow of income through tax evasion and flow of black money (money that is earned without paying taxes) are also ways to enhance available funds for development.

In order to tap into these funds, we would also require some policy reforms such as increased transparency, access to information and improved governance mechanisms. The Indian PM Narendra Modi mentioned this at the G20 Meet when he voiced the need for increased tax transparency and automatic exchange of tax information as vital to bring back the black money that has flown out of India. The G20 outcome Communiqué promises to put in place automatic tax information exchange processes by 2017-18. Something tells me we need to keep a close watch as milestones continue to get pushed ahead without any concrete actions in sight.

Echoing Meja’s sentiment, the success of the new development agenda would rest entirely on how much and in what way the money will flow in and direct the priorities for the next 15 years. And yes, it is no longer funny!

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